Chinese Equities Rose Nearly 5% Today

August 10, 2015

The Shanghai Composite Index’s 4.9% advance on Monday was powered by merger speculation and set a positive tone for share prices elsewhere. Stocks climbed 0.6% in Australia and Hong Kong, 0.4% in Japan, and so far have advanced by 2.3% in Greece, 1.1% in Spain, 0.8% in Italy, 0.7% in Switzerland and 0.6% in Germany and France. The DJIA leaped 175 points or 1.0% in the first 30 minutes of trading.

Ten-year sovereign debt yields have risen five basis points in the U.S., four bps in Britain, and one basis point in Germany. The 10-year Japanese JGB edged a basis point lower to 0.39%.

Federal Reserve Vice Chairman Fisher sent a mixed message. He acknowledged that the labor market is improving in response to the very loose policy stance and said higher inflation should follow as a result. But he also noted that inflation so far has stayed very low and suggested that he’d like to see inflation start normalizing before embarking on a rate normalization campaign. Many analysts continue to think a rate hike will happen September 17.

The dollar appreciated 0.6% against the Australian and New Zealand currencies, 0.5% vis-a-vis the Swiss franc, and 0.4% relative to the yen. But the greenback is unchanged versus the euro and yuan, up 0.1% against the loonie and down 0.1% against sterling.

Comex gold edged up 0.2% to $1,096.15 per ounce. West Texas Intermediate crude oil dipped 0.1% to $43.85 per barrel.

Japan’s current account recorded a June surplus of JPY 559 billion versus a deficit in June 2014 of JPY 364 billion. There was a first-half surplus of 8.184 trillion yen compared to a 498 billion yen deficit one year earlier. The seasonally adjusted JPY 1.3 trillion current account surplus in June was 21.5% smaller than May’s surplus, however, and below analyst expectations.

Japanese consumer confidence sank 1.4 points to a 6-month low of 40.3 in July.

Japanese stock and bond transactions last month generated a net capital outflow of JPY 1.693 trillion.

The on-year decline in Japanese bankruptcies of 10.8% in July lay between June’s drop of 4.7% and May’s of 13.2%.

Japanese bank lending rose 2.6% on year in July, up from 2.5% in both the first and second quarters of 2015.

Chinese CPI inflation accelerated to a 9-month high of 1.6% in June from 1.4% in May. But producer prices in China posted a deeper 12-month 5.4% decline.

In the year to July, consumer prices rose 0.7% in Denmark, 1.8% in Norway, and 0.5% in the Czech Republic.

The Sentix gauge of investor confidence in the eurozone a tenth of a point to a 2-month low of 18.4.

French business sentiment according to the Bank of France held steady at a reading of 98 in July. Central bank officials are projecting GDP growth of 0.2% in the second quarter (due this Friday), followed by 0.3% in 3Q.

Many countries reported industrial output. Swedish industrial production fell 1.0% on month in June, posting a smaller 1.2% 12-month increase. Greek industrial production slumped 4.5% between June 2014 and a year later, the largest 12-month slide in ten months. Danish industrial output advanced 4.7% in the year to June but just 0.1% between 1Q and 2Q. Finnish industrial production was 1.1% lower than a year earlier in June, and Malaysian output rose 4.3% in the same span.

Norwegian producer prices declined by 2.3% on month and 6.6% on year in July. The Czech jobless rate edged back up 0.1 percentage point (ppt) to 6.3% in July but was 1.1 ppts lower than in July 2014.

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